The Sri Lankan Silk Road

November 30, 2012

The Potential War Between China and the United States

Sri Lanka, the “pearl” of the Indian Ocean, is strategically located within the east-west international shipping passageway. Like the old Silk Road that stretched from the ancient Chinese capital of Xian all the way to ancient Rome, modern China’s strategic and commercial supply line extends over the Indian Ocean and the South China Sea to include the focal transit port of Sri Lanka at the southern tip of India. Today, over 85 percent of China’s energy imports from the Middle East and mineral resources from Africa transit through Sri Lanka and other so-called “string of pearls” ports. Beijing seeks to protect these “pearls” as strategic economic arteries anchored all the way from the Persian Gulf and African waters to Hong Kong. Colonel Christopher Pehrson at the US Army War College describes this elaborate network as:

“The manifestation of China’s rising geopolitical influence through efforts to increase access to ports and airfields, develop special diplomatic relationships, and modernize military forces that extend from the South China Sea through the Strait of Malacca, across the Indian Ocean, and on to the Arabian Gulf.”

To meet increasing demand for resources and to secure their maritime trading routes through the Indian Ocean, China has either built or reportedly planned to construct vital facilities in Bangladesh, Cambodia, Maldives, Myanmar, Pakistan, Seychelles, Sri Lanka, and Thailand. In addition to these projects, China has reportedly been exploring the expansion and establishment of other facilities at eastern and western maritime choking ports of the Indian Ocean – the Gulf of Aden and the Arabian Sea as well as the Strait of Malacca – to address growing piracy issues, especially around Somalia, Indonesia, Malaysia, and the Philippines.

Sri Lanka, the “crown jewel” of Beijing’s naval strategy, will soon have the over US$100 million Chinese-built Lotus Tower in Colombo – the highest edifice in South Asia and the nineteenth tallest building in the world – that can reportedly be seen from New Delhi. The Buddhist-inspired (through the Lotus Sutra), soaring telecommunication tower symbolizes not only Beijing’s foreign policy slogan of “Peaceful Rising,” but also projects an aura of power radiating from the former Middle Kingdom. Suddenly awakened to this reality, the United States and a “string of pearl”-encircled India are increasingly worried about the Chinese adventure in subtlety and its possibly concealed intentions for the Indian Ocean.

The Nervous Neighbor and the Assertive Visitor

One main cause of grave concern for Delhi and Washington is the construction of a billion dollar all-inclusive deepwater sea port at Hambantota – a small fishing village of 21,000 people on the southeastern coast of Sri Lanka. In exchange of generous financial, military, and diplomatic support to Sri Lanka, China has now begun to reap the benefits of its strategic investment on the island by using the sea port as a re-fuelling and docking station for the Chinese Navy and commercial shipments. Hambantota is also one of President Mahinda Rajapaksa’s constituencies and is represented by his 25-year-old son Namal in parliament – an implicit but masterful move to advance a political dynasty in Sri Lanka through an extensive network of family members who now govern the island and foreign diplomacy. It is a strategy famously dubbed the “Colombo Consensus” by the Economist magazine in London.

Critics have also pointed out that China has financed a comprehensive array of other infrastructure projects in Sri Lanka, including an oil-storage facility, a new airport, a coal-fired power plant, and an expressway, all of which are reportedly negotiated and managed by Rajapaksa family members. With cheap commercial credit and imported Chinese labor, Beijing also builds main roads and public buildings in the war-damaged northern and eastern regions, and constructs a modern performance arts center in Colombo. China has not only sold diesel railway engines and earthmoving equipment in the name of post-conflict reconstruction, but Chinese companies have also invested in electronic and garment-making industries for which the government of Sri Lanka established a special free-trade zone exclusively for Beijing.

Given India’s previous military debacle in Sri Lanka (similar to the US debacle in Vietnam) and the assassination of Indian Prime Minister Rajiv Gandhi by an LTTE suicide bomber, New Delhi leaders have restrained themselves from direct involvement in this new strategic pairing. At the same time, Sri Lankan Buddhist and Sinhalese leaders are sensitive to the fact that the island’s northern neighbor Tamil Nadu state – home to more than 60 million Tamils – has a historic kinship with their ethnic and religious counterparts in northern Sri Lanka.

More importantly, however, a complex disposition of global geopolitics (for example, the Nobel Laureate Dalai Lama and his Buddhist followers in the Tibetan parliament-in-exile just north of Delhi) has been a major concern for India, as well as for China. India has continued to be vigilant about becoming the traditional nexus between London and Washington, whereas the British Navy used the island’s China Bay in Trincomalee as a regional naval base until 1957 and it is still being occasionally used by visiting US Navy ships. In addition, their military outpost on the island of Diego Garcia (leased by London to Washington until 2036) is also in close proximity to India and Sri Lanka, and remains a constant irritant to Indian Ocean Zone of Peace advocates. As the dominant regional power in South Asia, India is faced with a glut of complex historical issues (like Tibet and Pakistan) and emerging realities (like terrorism and separatism) as China expands its economic and maritime networks through Sri Lanka.

Could Sri Lanka become a “Chinese island” in the Indian Ocean? Less than 25 miles off the coast of India, the rivalry between the US and its ideological nemesis Cuba comes to mind when one thinks about the increasingly autocratic, family-run Buddhist nation, which controls an estimated 70 percent of the national budget according to Jeremy Page of the Sunday Times in London. Therefore, might the nuisance Sri Lanka and its first family ever become more like “India’s Cuba” in the future?

In January 2012, President Rajapaksa revealed to a group of foreign correspondents that “Sri Lanka is no pearl on China’s string” but maintained that Indians are his “relations” and Chinese are his “friends.” The president intentionally left out the United States, traditionally the largest trade partner, and implied the British were neocolonialists who—along with the Americans—had successfully called for an external war crimes investigation against the Rajapaksa administration in the UN Human Rights Council in March 2012.

Despite all this, the increasing Chinese influence on the island is hardly a match for the global and regional power competitions over Indian Ocean supremacy. But the octopus-like, Colombo-centric new Silk Road is at the hub of an emerging Great Game for the new century.

The Colombo Consensus

Sri Lanka has been under the guidance of the International Monetary Fund (IMF) and the World Bank – both undergirded by the influence of American foreign policy – over the past three decades, including their austerity measures and the conditionality of these two Bretton Woods Institutions’ (BWIs) structural adjustment programs. It has been a painful experience for islanders whose social welfare in education, health, and agriculture was reduced by structural changes and budgetary reductions. The conditionality of Washington’s policy prescription, known as the Washington Consensus, has primarily been influenced by American-led trade liberalization, economic growth strategy, and democratic system of governance and transparency.

With the spectacular rise of Chinese economic success, which had opposed the conditionality of the Washington Consensus, Beijing has begun to challenge the “trinity” of Washington institutions (the World Bank, IMF, and the US Department of the Treasury) by offering concessional financial assistance and commercial loans to other countries, and quietly developing a “string of pearls” in the Indian ocean. In Colombo, The Sunday Times reported that China’s Export-Import Bank provided more than US$6.1 billion loans in 2009 for post-war development projects in Sri Lanka; this was more than the loans provided by traditional donors (the United States, India, and Japan) combined.

Unlike the BWIs in Washington, the Beijing Consensus has no conditions – like structural adjustments, policy reforms, competitive biddings, or democratic transparency – attached to their loans. The Sri Lankan ambassador to the United States told the New York Times in February 2010 that his “country looked for investors in America and around the world, but China offered the best terms,” and that Sri lanka doesn’t “have favorites.” In a final analysis, the Beijing offer of US$6.1 billion without conditionality over the Washington loan of US$2.6 billion was certainly more attractive for Rajapaksa. Indeed, the Chinese policy of non-interference in domestic affairs and respect for national sovereignty and local politics is one of the “best terms” for the Colombo administration.

Intersecting Sino-American and Indian Relations

As Colombo secured funds from Beijing and Washington, the United States and India, the most powerful and largest democracies in the world, have jointly pursued a mutually-beneficial strategy to advance their shared political and economic philosophy. As American firms begin to invest in India in the wake of the US-India civil nuclear pact, Japanese companies have also agreed to invest US$10 billion on an “industrial corridor” that extends 1,500 km between New Delhi and Mumbai – the booming commercial capital on the west coast. With such open economic and liberal trade policies, India has moved away from its historically lethargic “Hindu rate of growth” and non-aligned Movement foreign policy to a more western-oriented and robust economic, diplomatic, and military force on the world stage.

Beijing has perceived these actions as a sign that the United States and its allies (like Japan, South Korea, and Taiwan) are deliberately using India not only as a huge consumer market for their products and services but also as a counterweight to China in South Asia. China has simultaneously agreed to build two nuclear power plants for its traditional ally, Pakistan – the Indian arch-rival. There are now over 60 Chinese companies with more than 10,000 Chinese workers employed on 122 major development projects in Pakistan, including the Gwadar port and Saindak copper mine site in Baluchistan as well as the Gomal Zam dam project in Pakistan’s federally administered tribal areas. With a range of massive development and deepwater sea ports in Pakistan, Bangladesh, Myanmar, and Sri Lanka, China has actively put forward counterpoised strategies to discourage or limit the American presence in the region.

The United States views China’s “string of pearls” naval strategy not only as a balance of power issue but also as a show of force; the high-tech Lotus Tower in Colombo is the latest example. America’s involvement in Afghanistan (and increasingly in Pakistan) and the Central Asian republics as well as security and military ties to South-East Asian countries (like Indonesia, Singapore, and Vietnam) and north-east Asian countries (South Korea, Japan, and Taiwan) is more than an emblematic challenge to China’s pronounced “Peaceful Rising” foreign policy. Beijing leaders – especially military leaders – feel that the United States has encircled them geo-strategically with US bases and is selling advanced weapons to countries like Taiwan, a renegade republic in the Chinese perspective. Caught in the middle both figuratively and literally, the constellation of perceived threats makes India and Sri Lanka equally nervous.

Adhering to the path of “Peaceful Rising,” China has negotiated a number of settlements of territorial disputes with Russia, Vietnam, and India. These unprecedented diplomatic acts by Chinese leadership point to a different vision of power in international negotiation and diplomacy. At the UN Climate Summit in Copenhagen in December 2009, for example, both China and India – the world’s largest and fourth-largest emitters of greenhouse gases – joined forces together to oppose American-led demands for supporting strong anti-global warming measures. At the Cancun climate-change meeting in Mexico in December 2010, China took a leading role advancing an agreement. Such diplomatic triumphs made the evolving scope of international relations between and among America, China, and India even more complex.

The leading trio also shares a common enemy: terrorism both at home and abroad. Having global trade interests and investment opportunities, whether competitive or complementary, each nation continuously searches for greater security and stability in the Indian Ocean region as a prime necessity for their own national progress and employment. President Barack Obama’s visit to China, soon followed by Indian Prime Minister Manmohan Singh’s trip to Washington in November 2009, clearly signified the importance of the Chindian (that is, Chinese and Indian) role in South Asian security. Some commentators viewed the trajectory of political, military, and economic interdependence as a new pragmatism of cooperation and competition. In response to an influential December 2009 bipartisan US Congressional report (“Re-charting US Strategy on Sri Lanka” ) on Chinese inroads in the Indian Ocean passageway, the Obama administration has now begun to “reset” its approach to Sri Lanka.

The American Response through Colombo

With the support of UN Secretary General Ban Ki-moon, the Obama White House initially followed a Bush-like foreign policy to isolate Sri Lanka on the grounds of human rights violations and alleged war-crimes committed by both the military and the LTTE. By overriding America’s geopolitical interests in Sri Lanka, the American administration initially pushed the UN Secretary General to appoint an independent panel to investigate the atrocities committed by each party; Colombo successfully thwarted Ban Ki-moon’s initiative with Indian backing and Chinese support in May 2009.

Following continued pressure from the United States, the European Union and the United Nations, the government of Sri Lanka established the Lessons Learned and Reconciliation Commission (LLRC) with members appointed by President Rajapaksa himself. As the media publicized human rights violations alongside horrible images from Afghanistan and Iraq, the Obama administration took a softer view on Sri Lanka and its challenges. Commenting on Sri Lanka’s civilian casualties and the humanitarian crises of May 2009, President Obama said:

“I want to emphasize that these photos [of Sri Lanka] that were requested in this case are not particularly sensational, especially when compared to the painful images that we remember from Abu Ghraib, but they do represent conduct that did not conform with the Army Manual. That’s precisely why they were investigated.”

Balancing the uneasy challenges of hellish war situations and geostrategic interests, the United States subsequently lent implicit legitimacy to the LLRC in Colombo. After the Sri Lankan external affairs minister was invited to meet with Secretary Hillary Clinton at the State Department on May 28, 2010, Clinton said:

“I want to thank Minister Peiris for our productive discussion today and commend him for his commitment to the reconciliation process. The United States pledges our continued support to Sri Lanka.”

The minister also promised Clinton that detainees would be resettled within three months, but more importantly, he called for “a multidimensional relationship with the United States,” suggesting movement beyond alleged war crimes and human rights issues according to the State Department. The bipartisan authors of Re-charting US Strategy on Sri Lanka, Senators John Kerry (Democrat) and Richard Lugar (Republican), were more blunt, declaring:

“As Western countries became increasingly critical of the Sri Lankan Government’s handling of the war and human rights record, the Rajapaksa leadership cultivated ties with such countries as Burma, China, Iran, and Libya. While the United States shares with the Indians and the Chinese a common interest in securing maritime trade routes through the Indian Ocean, the US Government has invested relatively little in the economy or security sector in Sri Lanka, instead focusing more on Internally Displaced Persons and civil society. As a result, Sri Lanka has grown politically and economically isolated from the West.”

Having a greater awareness of China’s strategic and long-term geoeconomic foundation in Sri Lanka, the Kerry-Lugar Report made a cautionary note on America’s geopolitical interest and strategy: President Rajapaksa was forced to reach out to other countries because the West refused to help Sri Lanka finish the war against the LTTE. These calculations, if left unchecked, threaten long-term US strategic interests in the Indian Ocean.

The two senators concluded: “With the end of the war, the United States needs to re-evaluate its relationship with Sri Lanka to reflect new political and economic realities.” Then, they added: “While humanitarian concerns remain important, US policy toward Sri Lanka cannot be dominated by a single agenda. It is not effective at delivering real reform, and it shortchanges US geostrategic interests in the region…This strategic drift will have consequences for US interests...US policymakers have tended to underestimate Sri Lanka’s geostrategic importance for American interests…Sri Lanka is strategically located…directly in the middle of the ‘Old World,’ where an estimated half of the world’s container ships transit the Indian Ocean.”

Understanding Sri Lanka’s strategic importance to the United States, Sri Lankan Foreign Minister Peiris reinforced a similar vision outlined by the two Democratic and Republican senators – carefully using the word “multidimensional” to describe the nature of a new Great Game of larger geopolitical and geoeconomic dynamics in the region involving China and India. As an island nation, Sri Lanka’s long-term survival is equally dependant on continuous connection to both the “Old World” and old friends like the United States.

The Paradox of the Colombo Consensus

With the Colombo Consensus depicted by Rajapaksa Family Inc., Sri Lanka has departed from its long-cherished trademark of Western-style parliamentary democracy, open markets, and liberalized trade policies. Despite widely reported corruption and nepotism, the Rajapaksa dynasty appears to be pursuing a unique development strategy within a complex environment of global realities and domestic needs; all development projects must be nchanneled or approved by either the president himself or his older brother, Basil, head of the Ministry of Economic Development, who is notoriously known as “Mr. Ten Percent” for demanding a ten percent commission over every project. The president’s younger brother, Defense Secretary Gotabaya, has integrated the Ministry of Urban Development under his command in order to employ military personnel in the public work programs.

The confluence of the militarized economic development, widespread corruption, alleged war crimes, the concentration of all powers in the executive presidency, and family members easily getting elected to parliament, along with the arrogance and jubilant aftermath of the Eelam War, has presented a negative international image of the once-Buddhist and democratic nation. According to the Colombo-based Sunday Leader, mentor to Mahinda Rajapaksa and previous president, Chandrika Kumaratunga, said her successor’s “abuse of power” meant international relations have “spiraled down reaching a new low in the country’s history.” The former president then added that “Rajapaksas are uneducated and uncultured rascals,” concluding that the corruption is “appallingly bad” and the political climate is “vindictive and threatening.” The powerful characterization of her protégé further added to the notoriety of the Rajapaksa family, which is allegedly involved in extra-judicial killings and the disappearance of journalists.

With this worldwide reputation, the success of the Colombo Consensus and Sri Lanka’s human progress will now be defined by the degree of democratic freedom that the government allows for its people – not the absolute freedom enjoyed by combative leaders and their families who govern the island in the name of national interest for personal aggrandizement. If their professed faith in Buddhism would work, the doctrine of karma, outlined in the Lotus Sutra, will self-correct the power-play journey the island has embarked on, and their personal destiny and karmic legacy. But if the subtle and emerging tensions of a possible proxy war ever lead to direct conflict between either American, Chinese or Indian forces, an enormous tragedy for the “crown pearl” in South Asia would result. It may indeed cause a sad detour from the peace-driven, Colombo-centric new Silk Road of China.

PATRICK MENDIS, author of Trade for Peace and Commercial Providence, is an affiliate professor of public and international affairs at George Mason University. He ackowledges with thanks the assistance of Leah Green at Hong Kong University in writing this article.